March closed on new contract high finish and May, July and December hit new contract peaks. Slight drop expected in U.S. crop estimate, increased exports and lower ending stocks in USDA supply-demand reports. Mill on-call sales hit new record high.
Cotton futures surged to triple-digit current-crop closing gains Wednesday as spot March tested its contract high and some other deliveries hit new contract peaks.
March led the gains, settling up 130 points on a new contract high close at 79.65 cents, in the upper quarter of its 160-point range. It opened flat overnight, dipped to the session low at 78.33 cents, down two points, and jumped to a 158-point gain at 79.93 cents, shy of Friday’s contract high of 80.05 cents.
May closed up 127 points to 79.96 cents, trading within 143-point range from 78.69 to a new contract high at 80.12 cents. July finished up 112 points to 80.15 cents, trading within a 123-point span from 79.03 to a new contract high at 80.26 cents.
The other contracts settled up five to 54 points, with December up 20 points to 74.92 cents after it too posted a new contract high at 74.98.
U.S. dollar index futures weakness against a basket of six currencies and higher oil prices contributed to the advance.
Volume rose to an estimated 33,800 lots from 27,723 lots the prior session when spreads accounted for 18,059 lots or 65%, EFS 132 lots and EFP 90 lots. Options volume increased to 8,441 lots (4,320 calls and 4,121 puts) from 8,127 lots (3,984 calls and 4,143 puts).
Cotton analysts on average expect a slight decrease in the U.S. 2017-18 production estimate and a decline in domestic ending stocks in USDA’s updated supply-demand reports on Friday.
Exports are expected to be hiked 300,000 bales to 15.1 million, up from 14.92 million bales last season and the second highest on record behind 17.67 million bales in 2005-06. That’s based on fast-paced sales thus far, with commitments already at 78% of the December export estimate.
But there’s a notable difference of opinion because, for one thing, of shipments consistently lagging the pace needed to reach the projection. Shipments through Dec. 28 totaled around 24% of the export forecast.
Some analysts expect a fine tuning of planted and harvested acres based on certified acreage and insurance data. However, this apparently generally isn’t expected to have much impact on the production estimate, projected last month at 21.44 million bales, up 25% from last season.
Ending stocks are expected to fall to 5.51 million bales from 5.8 million estimated last month, up from beginning stocks of 2.75 million. Estimates ranged all the way from 4.91 million to 6.06 million bales.
Globally, analysts on average see ending stocks dropping to 87.29 million bales from USDA’s forecast last month of 88 million and from last season’s 87.65 million bales.
Ahead of the supply-demand reports will be the U.S. export sales data on Thursday for the week ended Jan. 4. Most expectations, which have underestimated sales more often than not, appear to be for a slight decline from the prior week’s upland sales of 193,900 running bales.
Meanwhile, heavy unpriced mill on-call sales have continued to offer futures support, hitting a new total all-time high of 154,288 lots (15.429 million bales) coming into last week, up 1,063 lots from a week earlier.
The latest weekly on-call data from the Commodity Futures Trading Commission showed producers priced a net 240 lots to trim their total unpriced position to 28,096 lots (a rounded 2.81 million bales).
This resulted in the net call difference widening 1,303 lots to 126,192 (12.619 million bales), which was 44.6% of the expanding futures open interest.
In spot March, which faces first notice day on Feb. 9, mills priced or rolled 2,704 lots to reduce their unfixed position there to 50,426 lots, while producers cut their open call position 904 lots to 7,454.
The net call difference of 42,972 lots, down 1,800 lots from a week earlier, represented 24.5% of March’s rising open interest. Unpriced mill sales outweighed those of producers by a ratio of 6.77:1.
Futures open interest dropped 883 lots to 285,954 on Tuesday, with March’s down 2,843 lots to 188,016 and May’s up 1,864 lots to 58,135. Certified stocks increased 277 bales to 47,942. There were 280 newly certified bales and three bales decertified.